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The impact of infrastructure on foreign direct investment: The case of Malaysia

Abu Bakar, Nor'Aznin and Che Mat, Siti Hadijah and Harun, Mukaramah (2012) The impact of infrastructure on foreign direct investment: The case of Malaysia. Procedia - Social and Behavioral Sciences, 65. pp. 205-211. ISSN 1877-0428

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The purpose of this study is to examine the role of infrastructure in influencing FDI inflows to Malaysia for the period of 1970-2010 using time series analysis techniques that address the problem of non-stationarity.Specifically, infrastructure together with other determinants of FDI such as market size, trade openness, and human capital are used to analyze their effects on FDI inflows.The ADF test is used to see whether all variables are stationary.Results obtained show that all variables are non-stationary and integrated of order one or I(1).After confirming that all variables are stationary, the ordinary least square (OLS) with the standard White Heteroskedasticity-Consistent Standard Errors and Covariance is employed to estimate the model. Findings indicate that infrastructure has a significant and positive effect on FDI inflows to Malaysia. As expected other FDI's determinants; market size, trade openness and human capital still play significant roles in determining FDI inflows to Malaysia. Results from this study can be used as guidance for policy makers on FDI where government can give more attention on the development of both; hard and soft infrastructure. The availability of infrastructure in a country definitely can attract FDI and further can accelerate the rate of economic development.

Item Type: Article
Uncontrolled Keywords: FDI; Trade; Unit root Test; Cointegration; Malaysia
Subjects: H Social Sciences > HF Commerce
Divisions: School of Economics, Finance & Banking
Depositing User: Prof. Dr. Nor Aznin Abu Bakar
Date Deposited: 29 Dec 2015 10:49
Last Modified: 30 May 2016 03:15

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